Horizontal Integration of Minnetonka praised for sustained growth

March 28, 2014 — 3:28pm

Neal ST. Anthony &#x2022; nstanthony@startribune.comJeff Washburne of City of Lakes Community Land Trust and developer Devean George stood on an abandoned north Minneapolis site that will be developed this summer into a housing-retail complex at Penn Avenue and Golden Valley Road, a couple of blocks from George’s childhood home.

Horizontal Integration, a Minnetonka digital agency that also provides strategic marketing and IT services, is an interesting growth story.

In the past decade, the company has grown from a two-person start-up to a team of more than 70 employees and more than 300 contractors on its payroll with offices here and in Denver. Revenue surged 41 percent to $44.5 million last year. And it has been recognized as one of "America's Top Job Creators" on the Build 100 Index of sustained growth companies by Inc. Magazine.

"More than 72 percent of all new U.S. jobs are created by 1 percent of companies," wrote Gary Kunkle, Inc.'s economist-in-residence. "The Build 100 represents that top 1 percent of that one percent. They should be celebrated, but they must also be studied so that we can better understand … the decisions, priorities, investments and strategies that helped them grow."

Horizontal Integration was created to help its clients serve customers by providing them with expert resources who can bridge the gap between marketing and IT, said founder and CEO Sabin Ephrem, a computer scientist and MBA who followed his physician wife to Minnesota from Chicago in 1985.

"The value proposition is unique," Ephrem said last week. "We call ourselves an integrated agency. We have a creative-agency component and an IT component. We come in with a wholistic view. We think through the technical plumbing as well as the creative side. We also have a staffing side … that supplies project managers, quality assurance people and IT professionals. Our consistent growth clearly reflects that the market needs the kinds of solutions we provide."

Ephrem said the competition includes the likes of the Nerdery of Bloomington and advertising agencies. But most agencies "lack our technical bandwidth and the technical firms lack our creative expertise."

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Ephrem

Clients include UnitedHealth Group, Target, Ameriprise, Xcel Energy, Starkey Hearing and a number of out-of-state businesses.

Good play by Devean George

Devean George, son of north Minneapolis and real estate developer who's about to break ground on an $11 million-plus residential-retail complex at Penn Avenue N. and Golden Valley Road, has been quietly spreading a bit of his celebrity and a lot of his time with North Side partners.

The Augsburg College graduate, who retired from the NBA in 2011, has spent several years putting together his first big North Side project and uses his North Side-based nonprofit, Building Blocks, in partnership with existing agencies that encourage family self-sufficiency, school success, job training and employment.

Last weekend George spoke at the annual fundraiser for the City of Lakes Community Land Trust, another North Side nonprofit that works with the city and financial institutions to help working-class families buy refurbished city housing lost to foreclosure. George talked about the "continuum of housing" and how he expects to see some families at his rental units, where they also will benefit from several on-site nonprofits, get their finances together, upgrade employment and move into neighborhood houses, said Jeff Washburne,executive director of the land trust (www.clclt.org).

Washburne, who has helped nearly 200 families buy quality housing over the last decade, expects to do up to 40 transactions this year. The average purchasing family of three earns about $33,000, about half the Twin Cities average household income. Owners are disproportionately minorities and immigrants. And there have been only seven foreclosures over the years. Prospective owners go through a rigorous homeownership training program. And the CLCLT foreclosure rate is less than Minneapolis' as a whole.

Two other multifamily projects are under construction or planned within several blocks of George's Commons at Penn Avenue, according to the city planning agency.

Meanwhile, business is picking up for North Side architects Jamil Ford and David Witt, whose Mobilize Design & Architecture (www.mobilizearchitecture.com) is the designer for Commons, as well as the under-construction Hennepin County service center on Plymouth Avenue and several other planned projects.

Target in the cross hairs of critics

Target got blasted again Wednesday as a critical U.S. Senate report and a three-hour hearing over its November-December data breach put the retailer back in the headlines. "In the future, at some point, the CEO and board of directors have to take responsibility," Sen. Jay Rockefeller, D-W.Va., told John Mulligan, Target's chief financial officer.

Responding to a query from the Star Tribune, the Target board this month said in a statement that CEO "Gregg Steinhafel has the full confidence of the board. We believe he is the right leader for Target to navigate through the current challenges we are facing."

Steinhafel is a metrics-driven executive. And the numbers are not going his way. Since the breach, Target shares have fallen 3.9 percent. Total return to Target shareholders, including dividends, has been 8.6 percent annualized over the last three years, compared with 16.1 percent for archrival Wal-Mart, 20.2 percent for Costco and 14.5 percent for the S&P 500 index of America's largest companies.

A career Target manager, Steinhafel has presided over the massive cyberdata breach that exposed confidential information of tens of millions of customers; a botched store offensive into Canada; overall weak sales, and what Target admitted in a federal filing was an incalculable breach of customer trust. Target's chief technology officer walked the plank this month.

Gary Hewitt, head of research at New York-based GMI Ratings, said: "Steinhafel also is chairman of that board … and it takes a lot to push a board over to take independent action against a CEO." Hewitt, whose firm analyzes corporate governance and performance, said: "Boards want to give CEOs time to work things out … unless there is a lot of discontent from powerful investors.''

Shriveling Gevo adds ethanol production in luverne

Gevo, the Denver-based company that converted a Luverne, Minn., ethanol plant to produce another type of alcohol, said last week that it will resume partial ethanol production in the plant.

The company, based in Englewood, Colo., has struggled to ramp up commercial fermentation of corn into isobutanol, which is used as motor fuel and to make chemicals, bioplastics and jet fuel. Gevo CEO Pat Gruber told analysts that the plant can produce both kinds of alcohol, and will resume ethanol making to take advantage of the current high profit margin in that fuel.

"Needless to say, the additional cash flow is a benefit," said Gruber, a onetime Cargill scientist, whose company has been burning through cash to develop the promising isobutanol business.

Gevo, which irritated shareholders over isobutanol-production snafus and diluted their shares when the company had to raise more equity capital last year, has seen its stock fall from nearly $10 per share two years ago to less than $1.20 recently.

Neal St. Anthony has been a business columnist and reporter for the Star Tribune for 30 years. He also has worked in financial communications for two publicly held companies. Follow @StAnthonyStrib